Here’s a little thought: When a tax information form is longer than the tax form itself, the tax code might have a problem.
This is our federal tax code: a bureaucratic minefield with the primary purpose of inducing blood pressure spikes.
Take my experience this year. Because I hold some money in a foreign bank account, I have to file forms that do not appear on TurboTax. These require the filer to calculate the U.S. dollar value of the account at its highest holding point during the year. This is not a problem per se, but it does reflect a weird laziness on the part of the IRS. After all, why not simply let IRS auditors calculate the holding exchange rate on their own terms? That would at least ensure consistency.
But that’s not the IRS way. Instead, as the IRS’s insanely user unfriendly website proves, the federal tax agency prefers to keep things complicated.
It is ultimately the politicians’ fault. They carved out idiotic special interests such as those related to pets. But it means even the most basic tax forms are absurd. While the range of deductions were somewhat lessened by the 2017 tax reform bill, many still remain. Again, however, most deductions are firmly suited to helping the upper middle class. Beyond college tuition deductions, there’s little in the tax code to assist millennials. Such is the way of our young-to-old redistributive entitlement system.
Another issue with the tax code is that even the supposed experts can’t seem to figure it out. I had two experiences with TurboTax representatives this year in which they were at best unsure as to how I was supposed to fill in a particular part of my tax forms. That speaks to the primary beneficiary of this tax code mess: accountants. Because it is accountants who are the only ones capable of making tax filing less than painful. And they reap the dividends therein.
Where does this leave us?
Well, focused on morality in the code, I believe we should greatly simplify the tax code by eliminating the vast majority of deductions, and reducing rates (albeit on a progressive scale). We should also institute a federal sales tax to allow for even greater corporate and income tax reductions. But we should be embarrassed by our tax code. It is far more complicated than those of most other developed nations, and it fosters inefficient allocation of capital.
